Possible Wheat Shortage

February 8/Washington/The International Herald Tribune --  The U.N. Food and Agriculture Organization issued an alert that a severe drought was threatening the wheat crop in China, the world's largest wheat producer, and even resulting in shortages of drinking water for people and livestock.

The state-run news media in China warned that the country's major agricultural regions were facing their worst drought in 60 years and said that Shandong Province, a cornerstone of Chinese grain production, was bracing for its worst drought in 200 years unless substantial precipitation came by the end of this month.

World wheat prices are already surging and have been widely cited as one reason for protests in Egypt and elsewhere in the Arab world. China has been essentially self-sufficient in grain for decades for national security reasons, and any move by China to import large quantities of food in response to the drought could drive international prices even higher, creating serious problems for less-affluent countries that rely on imported food.

''China's grain situation is critical to the rest of the world -- if they are forced to go out on the market to procure adequate supplies for their population, it could send huge shock waves through the world's grain markets,'' said Robert S. Zeigler, the director general of the International Rice Research Institute in Los Banos, Philippines.

The Food and Agriculture Organization said that 5.16 million hectares, or 12.75 million acres, of China's 14 million hectares of wheat fields had been affected by the drought, and that 2.57 million people and 2.79 million head of livestock faced shortages of drinking water.

Ask international grain trade experts about China and their first reaction is to say that they need to look up how much grain China actually produces and trades.

Yet while world food reports barely mention China, partly because many details of the country's agriculture production and reserves are state secrets, China is actually enormously important to the world's food supply -- especially if something goes wrong.

The heat wave in Russia last summer, combined with floods in Australia in recent months, have drawn worldwide attention to the international wheat market because both countries have historically been big exporters. Soaring wheat prices have been a particular trigger for food-related protests this year, in contrast to three years ago, when rice led food price increases and caused food riots from Haiti to Senegal.

China's wheat industry exists in almost total isolation from the rest of the world, with virtually no exports or imports until last year, when modest imports began. Yet it is huge, accounting for one-sixth of global output. The statistical database of the U.N. food agency shows that in 2009, the last year available, China produced almost twice as much wheat as the U.S. or Russia and more than five times as much as Australia.

The ground is so dry at the moment that from Beijing south through the provinces of Hebei, Henan and Shandong to Jiangsu Province, just north of Shanghai, the trees and houses are coated with topsoil that has blown off parched fields.

China's national obsession with self-sufficiency in food includes corn as well, another crop that is grown and consumed entirely in China with minimal imports or exports. Little known outside of China, the country's corn industry actually grows one-fifth of the world's corn, according to F.A.O. statistics. China's corn crop is mostly in the country's northern provinces, where the drought is worst now.

Gunjal said that the success or failure of the corn crop, as well as the rice crop, would depend mostly on rainfall this coming spring and summer, not the shortage of rain this winter.

With $2.85 trillion in foreign exchange reserves, nearly three times the reserves of Japan, the country with the second-largest reserves, China has ample buying power to prevent any recurrence of the periodic famines that killed millions of Chinese as recently as the early 1960s.

''They can buy whatever they need to buy, and they can outbid anyone,'' Zeigler said. China's self-sufficiency in grain prevented world food prices from moving even higher when they spiked three years ago, he added.

China had about 55 million tons of wheat in stockpiles as of last summer, Gunjal said. That is equal to about half the annual harvest.

China is already the world's largest importer of soybeans, which are oilseeds, not a grain. China buys soybeans mainly for use as animal feed, because the Chinese diet is shifting toward more meat.

From the February 9, 2011, Prepared Foods' Daily News
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